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H.R. 1436 (108th): Energy Independence and Security Act of 2003


The text of the bill below is as of Mar 25, 2003 (Introduced). The bill was not enacted into law.


HR 1436 IH

108th CONGRESS

1st Session

H. R. 1436

To amend the Internal Revenue Code of 1986 to enhance energy conservation, research, and development and to provide for security and diversity in the energy supply for the American people.

IN THE HOUSE OF REPRESENTATIVES

March 25, 2003

Mr. SANDLIN introduced the following bill; which was referred to the Committee on Ways and Means


A BILL

To amend the Internal Revenue Code of 1986 to enhance energy conservation, research, and development and to provide for security and diversity in the energy supply for the American people.

    Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE, ETC.

    (a) SHORT TITLE- This Act may be cited as the ‘Energy Independence and Security Act of 2003’.

    (b) AMENDMENT OF 1986 CODE- Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.

    (c) TABLE OF CONTENTS-

      Sec. 1. Short title, etc.

      Sec. 2. Credit for residential solar energy property.

      Sec. 3. Credit for energy efficiency improvements to existing homes.

      Sec. 4. Alternative motor vehicle credit.

      Sec. 5. Extension and expansion of credit for electricity produced from renewable resources.

      Sec. 6. Credit for production from qualifying advanced clean coal technology.

      Sec. 7. Oil and gas from marginal wells.

      Sec. 8. Natural gas gathering lines treated as 7-year property.

      Sec. 9. Temporary suspension of limitation based on 65 percent of taxable income and extension of suspension of taxable income limit with respect to marginal production.

      Sec. 10. Election to expense geological and geophysical expenditures.

      Sec. 11. Five-year net operating loss carryback for losses attributable to operating mineral interests of oil and gas producers.

      Sec. 12. Extension and modification of credit for producing fuel from a nonconventional source.

SEC. 2. CREDIT FOR RESIDENTIAL SOLAR ENERGY PROPERTY.

    (a) IN GENERAL- Subpart A of part IV of subchapter A of chapter 1 (relating to nonrefundable personal credits) is amended by inserting after section 25B the following new section:

‘SEC. 25C. RESIDENTIAL SOLAR ENERGY PROPERTY.

    ‘(a) ALLOWANCE OF CREDIT- In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of--

      ‘(1) 15 percent of the qualified photovoltaic property expenditures made by the taxpayer during such year, and

      ‘(2) 15 percent of the qualified solar water heating property expenditures made by the taxpayer during the taxable year.

    ‘(b) LIMITATIONS-

      ‘(1) MAXIMUM CREDIT- The credit allowed under subsection (a) shall not exceed--

        ‘(A) $2,000 for each system of property described in subsection (c)(1), and

        ‘(B) $2,000 for each system of property described in subsection (c)(2).

      ‘(2) SAFETY CERTIFICATIONS- No credit shall be allowed under this section for an item of property unless--

        ‘(A) in the case of solar water heating equipment, such equipment is certified for performance and safety by the non-profit Solar Rating Certification Corporation or a comparable entity endorsed by the government of the State in which such property is installed, and

        ‘(B) in the case of a photovoltaic system, such system meets appropriate fire and electric code requirements.

      ‘(3) LIMITATION BASED ON AMOUNT OF TAX- The credit allowed under subsection (a) for the taxable year shall not exceed the excess of--

        ‘(A) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over

        ‘(B) the sum of the credits allowable under this subpart (other than this section and sections 23 and 25D) and section 27 for the taxable year.

    ‘(c) DEFINITIONS- For purposes of this section--

      ‘(1) QUALIFIED SOLAR WATER HEATING PROPERTY EXPENDITURE- The term ‘qualified solar water heating property expenditure’ means an expenditure for property to heat water for use in a dwelling unit located in the United States and used as a residence if at least half of the energy used by such property for such purpose is derived from the sun.

      ‘(2) QUALIFIED PHOTOVOLTAIC PROPERTY EXPENDITURE- The term ‘qualified photovoltaic property expenditure’ means an expenditure for property that uses solar energy to generate electricity for use in a dwelling unit.

      ‘(3) SOLAR PANELS- No expenditure relating to a solar panel or other property installed as a roof (or portion thereof) shall fail to be treated as property described in paragraph (1) or (2) solely because it constitutes a structural component of the structure on which it is installed.

      ‘(4) LABOR COSTS- Expenditures for labor costs properly allocable to the onsite preparation, assembly, or original installation of the property described in paragraph (1) or (2) and for piping or wiring to interconnect such property to the dwelling unit shall be taken into account for purposes of this section.

      ‘(5) SWIMMING POOLS, ETC., USED AS STORAGE MEDIUM- Expenditures which are properly allocable to a swimming pool, hot tub, or any other energy storage medium which has a function other than the function of such storage shall not be taken into account for purposes of this section.

    ‘(d) SPECIAL RULES-

      ‘(1) DOLLAR AMOUNTS IN CASE OF JOINT OCCUPANCY- In the case of any dwelling unit which is jointly occupied and used during any calendar year

as a residence by 2 or more individuals the following shall apply:

        ‘(A) The amount of the credit allowable under subsection (a) by reason of expenditures (as the case may be) made during such calendar year by any of such individuals with respect to such dwelling unit shall be determined by treating all of such individuals as 1 taxpayer whose taxable year is such calendar year.

        ‘(B) There shall be allowable with respect to such expenditures to each of such individuals, a credit under subsection (a) for the taxable year in which such calendar year ends in an amount which bears the same ratio to the amount determined under subparagraph (A) as the amount of such expenditures made by such individual during such calendar year bears to the aggregate of such expenditures made by all of such individuals during such calendar year.

      ‘(2) TENANT-STOCKHOLDER IN COOPERATIVE HOUSING CORPORATION- In the case of an individual who is a tenant-stockholder (as defined in section 216) in a cooperative housing corporation (as defined in such section), such individual shall be treated as having made his tenant-stockholder’s proportionate share (as defined in section 216(b)(3)) of any expenditures of such corporation.

      ‘(3) CONDOMINIUMS-

        ‘(A) IN GENERAL- In the case of an individual who is a member of a condominium management association with respect to a condominium which he owns, such individual shall be treated as having made his proportionate share of any expenditures of such association.

        ‘(B) CONDOMINIUM MANAGEMENT ASSOCIATION- For purposes of this paragraph, the term ‘condominium management association’ means an organization which meets the requirements of paragraph (1) of section 528(c) (other than subparagraph (E) thereof) with respect to a condominium project substantially all of the units of which are used as residences.

      ‘(4) ALLOCATION IN CERTAIN CASES- If less than 80 percent of the use of an item is for nonbusiness purposes, only that portion of the expenditures for such item which is properly allocable to use for nonbusiness purposes shall be taken into account.

      ‘(5) WHEN EXPENDITURE MADE; AMOUNT OF EXPENDITURE-

        ‘(A) IN GENERAL- Except as provided in subparagraph (B), an expenditure with respect to an item shall be treated as made when the original installation of the item is completed.

        ‘(B) EXPENDITURES PART OF BUILDING CONSTRUCTION- In the case of an expenditure in connection with the construction or reconstruction of a structure, such expenditure shall be treated as made when the original use of the constructed or reconstructed structure by the taxpayer begins.

        ‘(C) AMOUNT- The amount of any expenditure shall be the cost thereof.

      ‘(6) PROPERTY FINANCED BY SUBSIDIZED ENERGY FINANCING- For purposes of determining the amount of expenditures made by any individual with respect to any dwelling unit, there shall not be taken in to account expenditures which are made from subsidized energy financing (as defined in section 48(a)(4)(A)).

    ‘(e) BASIS ADJUSTMENTS- For purposes of this subtitle, if a credit is allowed under this section for any expenditure with respect to any property, the increase in the basis of such property which would (but for this subsection) result from such expenditure shall be reduced by the amount of the credit so allowed.

    ‘(f) TERMINATION- The credit allowed under this section shall not apply to taxable years beginning after December 31, 2008 (December 31, 2009, with respect to qualified photovoltaic property expenditures).’.

    (b) CONFORMING AMENDMENTS-

      (1) Subsection (a) of section 1016 is amended by striking ‘and’ at the end of paragraph (27), by striking the period at the end of paragraph (28) and inserting ‘, and’, and by adding at the end the following new paragraph:

      ‘(29) to the extent provided in section 25C(e), in the case of amounts with respect to which a credit has been allowed under section 25C.’.

      (2) The table of sections for subpart A of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 25B the following new item:

‘Sec. 25C. Residential solar energy property.’.

    (c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years ending after December 31, 2003.

SEC. 3. CREDIT FOR ENERGY EFFICIENCY IMPROVEMENTS TO EXISTING HOMES.

    (a) IN GENERAL- Subpart A of part IV of subchapter A of chapter 1 (relating to nonrefundable personal credits) is amended by inserting after section 25C the following new section:

‘SEC. 25D. ENERGY EFFICIENCY IMPROVEMENTS TO EXISTING HOMES.

    ‘(a) ALLOWANCE OF CREDIT- In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 20 percent of the amount paid or incurred by the taxpayer for qualified energy efficiency improvements installed during such taxable year.

    ‘(b) LIMITATIONS-

      ‘(1) MAXIMUM CREDIT- The credit allowed by this section with respect to a dwelling shall not exceed $2,000.

      ‘(2) PRIOR CREDIT AMOUNTS FOR TAXPAYER ON SAME DWELLING TAKEN INTO ACCOUNT- If a credit was allowed to the taxpayer under subsection (a) with respect to a dwelling in 1 or more prior taxable years, the amount of the credit otherwise allowable for the taxable year with respect to that dwelling shall not exceed the amount of $2,000 reduced by the sum of the credits allowed under subsection

(a) to the taxpayer with respect to the dwelling for all prior taxable years.

      ‘(3) LIMITATION BASED ON AMOUNT OF TAX- The credit allowed under subsection (a) for the taxable year shall not exceed the excess of--

        ‘(A) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over

        ‘(B) the sum of the credits allowable under this subpart (other than this section and section 23) and section 27 for the taxable year.

    ‘(c) CARRYFORWARD OF UNUSED CREDIT- If the credit allowable under subsection (a) exceeds the limitation imposed by subsection (b)(3) for such taxable year, such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such succeeding taxable year.

    ‘(d) QUALIFIED ENERGY EFFICIENCY IMPROVEMENTS- For purposes of this section, the term ‘qualified energy efficiency improvements’ means any energy efficient building envelope component which meets the prescriptive criteria for such component established by the 1998 International Energy Conservation Code, if--

      ‘(1) such component is installed in or on a dwelling--

        ‘(A) located in the United States, and

        ‘(B) owned and used by the taxpayer as the taxpayer’s principal residence (within the meaning of section 121),

      ‘(2) the original use of such component commences with the taxpayer, and

      ‘(3) such component reasonably can be expected to remain in use for at least 5 years.

    If the aggregate cost of such components with respect to any dwelling exceeds $1,000, such components shall be treated as qualified energy efficiency improvements only if such components are also certified in accordance with subsection (e) as meeting such criteria.

    ‘(e) CERTIFICATION- The certification described in subsection (d) shall be--

      ‘(1) determined on the basis of the technical specifications or applicable ratings (including product labeling requirements) for the measurement of energy efficiency, based upon energy use or building envelope component performance, for the energy efficient building envelope component,

      ‘(2) provided by a local building regulatory authority, a utility, a manufactured home production inspection primary inspection agency (IPIA), or an accredited home energy rating system provider who is accredited by or otherwise authorized to use approved energy performance measurement methods by the Home Energy Ratings Systems Council or the National Association of State Energy Officials, and

      ‘(3) made in writing in a manner that specifies in readily verifiable fashion the energy efficient building envelope components installed and their respective energy efficiency levels.

    ‘(f) DEFINITIONS AND SPECIAL RULES-

      ‘(1) TENANT-STOCKHOLDER IN COOPERATIVE HOUSING CORPORATION- In the case of an individual who is a tenant-stockholder (as defined in section 216) in a cooperative housing corporation (as defined in such section), such individual shall be treated as having paid his tenant-stockholder’s proportionate share (as defined in section 216(b)(3)) of the cost of qualified energy efficiency improvements made by such corporation.

      ‘(2) CONDOMINIUMS-

        ‘(A) IN GENERAL- In the case of an individual who is a member of a condominium management association with respect to a condominium which he owns, such individual shall be treated as having paid his proportionate share of the cost of qualified energy efficiency improvements made by such association.

        ‘(B) CONDOMINIUM MANAGEMENT ASSOCIATION- For purposes of this paragraph, the term ‘condominium management association’ means an organization which meets the requirements of paragraph (1) of section 528(c) (other than subparagraph (E) thereof) with respect to a condominium project substantially all of the units of which are used as residences.

      ‘(3) BUILDING ENVELOPE COMPONENT- The term ‘building envelope component’ means insulation material or system which is specifically and primarily designed to reduce the heat loss or gain of a dwelling when installed in or on such dwelling, exterior windows (including skylights) and doors, and metal roofs with appropriate pigmented coatings which are specifically and primarily designed to reduce the heat gain of a dwelling when installed in or on such dwelling.

      ‘(4) MANUFACTURED HOMES INCLUDED- For purposes of this section, the term ‘dwelling’ includes a manufactured home which conforms to Federal Manufactured Home Construction and Safety Standards (24 CFR 3280).

    ‘(g) BASIS ADJUSTMENT- For purposes of this subtitle, if a credit is allowed under this section for any expenditure with respect to any property, the increase in the basis of such property which would (but for this subsection) result from such expenditure shall be reduced by the amount of the credit so allowed.

    ‘(h) APPLICATION OF SECTION- This section shall apply to qualified energy efficiency improvements installed after December 31, 2003 and before January 1, 2009.’.

    (b) CONFORMING AMENDMENTS-

      (1) Subsection (a) of section 1016 is amended by striking ‘and’ at the end of paragraph (28), by striking the period at the end of paragraph (29) and inserting ‘, and’, and by adding at the end the following new paragraph:

      ‘(30) to the extent provided in section 25D(g), in the case of amounts with respect to which a credit has been allowed under section 25D.’.

      (2) The table of sections for subpart A of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 25C the following new item:

‘Sec. 25D. Energy efficiency improvements to existing homes.’.

    (c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years ending after December 31, 2003.

SEC. 4. ALTERNATIVE MOTOR VEHICLE CREDIT.

    (a) IN GENERAL- Subpart B of part IV of subchapter A of chapter 1 (relating to other credits) is amended by adding at the end the following:

‘SEC. 30B. ALTERNATIVE MOTOR VEHICLE CREDIT.

    ‘(a) ALLOWANCE OF CREDIT- There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of--

      ‘(1) the new qualified fuel cell motor vehicle credit determined under subsection (b), and

      ‘(2) the new qualified hybrid motor vehicle credit determined under subsection (c).

    ‘(b) NEW QUALIFIED FUEL CELL MOTOR VEHICLE CREDIT-

      ‘(1) IN GENERAL- For purposes of subsection (a), the new qualified fuel cell motor vehicle credit determined under this subsection with respect to a new qualified fuel cell motor vehicle placed in service by the taxpayer during the taxable year is--

        ‘(A) $4,000, if such vehicle has a gross vehicle weight rating of not more than 8,500 pounds,

        ‘(B) $10,000, if such vehicle has a gross vehicle weight rating of more than 8,500 pounds but not more than 14,000 pounds,

        ‘(C) $20,000, if such vehicle has a gross vehicle weight rating of more than 14,000 pounds but not more than 26,000 pounds, and

        ‘(D) $40,000, if such vehicle has a gross vehicle weight rating of more than 26,000 pounds.

      ‘(2) INCREASE FOR FUEL EFFICIENCY-

        ‘(A) IN GENERAL- The amount determined under paragraph (1)(A) with respect to a new qualified fuel cell motor vehicle which is a passenger automobile or light truck shall be increased by--

          ‘(i) $1,000, if such vehicle achieves at least 150 percent but less than 175 percent of the 2002 model year city fuel economy,

          ‘(ii) $1,500, if such vehicle achieves at least 175 percent but less than 200 percent of the 2002 model year city fuel economy,

          ‘(iii) $2,000, if such vehicle achieves at least 200 percent but less than 225 percent of the 2002 model year city fuel economy,

          ‘(iv) $2,500, if such vehicle achieves at least 225 percent but less than 250 percent of the 2002 model year city fuel economy,

          ‘(v) $3,000, if such vehicle achieves at least 250 percent but less than 275 percent of the 2002 model year city fuel economy,

          ‘(vi) $3,500, if such vehicle achieves at least 275 percent but less than 300 percent of the 2002 model year city fuel economy, and

          ‘(vii) $4,000, if such vehicle achieves at least 300 percent of the 2002 model year city fuel economy.

        ‘(B) 2002 MODEL YEAR CITY FUEL ECONOMY- For purposes of subparagraph (A), the 2002 model year city fuel economy with respect to a vehicle shall be determined in accordance with the following tables:

          ‘(i) In the case of a passenger automobile:

‘If vehicle inertia weight class is:

The 2002 model year city fuel economy is:

1,500 or 1,750 lbs

43.7 mpg

2,000 lbs

38.3 mpg

2,250 lbs

34.1 mpg

2,500 lbs

30.7 mpg

2,750 lbs

27.9 mpg

3,000 lbs

25.6 mpg

3,500 lbs

22.0 mpg

4,000 lbs

19.3 mpg

4,500 lbs

17.2 mpg

5,000 lbs

15.5 mpg

5,500 lbs

14.1 mpg

6,000 lbs

12.9 mpg

6,500 lbs

11.9 mpg

7,000 or 8,500 lbs

11.1 mpg.

          ‘(ii) In the case of a light truck:

‘If vehicle inertia weight class is:

The 2002 model year city fuel economy is:

1,500 or 1,750 lbs

37.6 mpg

2,000 lbs

33.7 mpg

2,250 lbs

30.6 mpg

2,500 lbs

28.0 mpg

2,750 lbs

25.9 mpg

3,000 lbs

24.1 mpg

3,500 lbs

21.3 mpg

4,000 lbs

19.0 mpg

4,500 lbs

17.3 mpg

5,000 lbs

15.8 mpg

5,500 lbs

14.6 mpg

6,000 lbs

13.6 mpg

6,500 lbs

12.8 mpg

7,000 or 8,500 lbs

12.0 mpg.

        ‘(C) VEHICLE INERTIA WEIGHT CLASS- For purposes of subparagraph (B), the term ‘vehicle inertia weight class’ has the same meaning as when defined in regulations prescribed by the Administrator of the Environmental Protection Agency for purposes of the administration of title II of the Clean Air Act (42 U.S.C. 7521 et seq.).

      ‘(3) NEW QUALIFIED FUEL CELL MOTOR VEHICLE- For purposes of this subsection, the term ‘new qualified fuel cell motor vehicle’ means a motor vehicle--

        ‘(A) which is propelled by power derived from one or more cells which convert chemical energy directly into electricity by combining oxygen with hydrogen fuel which is stored on board the vehicle in any form and may or may not require reformation prior to use,

        ‘(B) which, in the case of a passenger automobile or light truck--

          ‘(i) for 2004 and later model vehicles, has received a certificate of conformity under the Clean Air Act and meets or exceeds the equivalent qualifying California low emission vehicle standard under section 243(e)(2) of the Clean Air Act for that make and model year, and

          ‘(ii) for 2006 and later model vehicles, has received a certificate that such vehicle meets or exceeds the Tier II emission level established in regulations prescribed by the Administrator of the Environmental Protection Agency under section 202(i) of the Clean Air Act for that make and model year vehicle,

        ‘(C) the original use of which commences with the taxpayer,

        ‘(D) which is acquired for use or lease by the taxpayer and not for resale, and

        ‘(E) which is made by a manufacturer.

    ‘(c) NEW QUALIFIED HYBRID MOTOR VEHICLE CREDIT-

      ‘(1) IN GENERAL- For purposes of subsection (a), the new qualified hybrid motor vehicle credit determined under this subsection with respect to a new qualified hybrid motor vehicle placed in service by the taxpayer during the taxable year is the credit amount determined under paragraph (2).

      ‘(2) CREDIT AMOUNT-

        ‘(A) IN GENERAL- The credit amount determined under this paragraph shall be determined in accordance with the following tables:

          ‘(i) In the case of a new qualified hybrid motor vehicle which is a passenger automobile or light truck and which provides the following percentage of the maximum available power:

‘If percentage of the maximum available power is:

The credit amount is:

At least 2.5 percent but less than 10 percent

$250

At least 10 percent but less than 20 percent

$500

At least 20 percent but less than 30 percent

$750

At least 30 percent

$1,000.

          ‘(ii) In the case of a new qualified hybrid motor vehicle which is a heavy duty hybrid motor vehicle and which provides the following percentage of the maximum available power:

            ‘(I) If such vehicle has a gross vehicle weight rating of not more than 14,000 pounds:

‘If percentage of the maximum available power is:

The credit amount is:

At least 20 percent but less than 30 percent

$1,500

At least 30 percent but less than 40 percent

$1,750

At least 40 percent but less than 50 percent

$2,000

At least 50 percent but less than 60 percent

$2,250

At least 60 percent

$2,500.

            ‘(II) If such vehicle has a gross vehicle weight rating of more than 14,000 but not more than 26,000 pounds:

‘If percentage of the maximum available power is:

The credit amount is:

At least 20 percent but less than 30 percent

$4,000

At least 30 percent but less than 40 percent

$4,500

At least 40 percent but less than 50 percent

$5,000

At least 50 percent but less than 60 percent

$5,500

At least 60 percent

$6,000.

            ‘(III) If such vehicle has a gross vehicle weight rating of more than 26,000 pounds:

‘If percentage of the maximum available power is:

The credit amount is:

At least 20 percent but less than 30 percent

$6,000

At least 30 percent but less than 40 percent

$7,000

At least 40 percent but less than 50 percent

$8,000

At least 50 percent but less than 60 percent

$9,000

At least 60 percent

$10,000.

        ‘(B) INCREASE FOR FUEL EFFICIENCY-

          ‘(i) AMOUNT- The amount determined under subparagraph (A)(i) with respect to a passenger automobile or light truck shall be increased by--

            ‘(I) $1,000, if such vehicle achieves at least 125 percent but less than 150 percent of the 2002 model year city fuel economy,

            ‘(II) $1,500, if such vehicle achieves at least 150 percent but less than 175 percent of the 2002 model year city fuel economy,

            ‘(III) $2,000, if such vehicle achieves at least 175 percent but less than 200 percent of the 2002 model year city fuel economy,

            ‘(IV) $2,500, if such vehicle achieves at least 200 percent but less than 225 percent of the 2002 model year city fuel economy,

            ‘(V) $3,000, if such vehicle achieves at least 225 percent but less than 250 percent of the 2002 model year city fuel economy, and

            ‘(VI) $3,500, if such vehicle achieves at least 250 percent of the 2002 model year city fuel economy.

          ‘(ii) 2002 MODEL YEAR CITY FUEL ECONOMY- For purposes of clause (i), the 2002 model year city fuel economy with respect to a vehicle shall be determined using the tables provided in subsection (b)(2)(B) with respect to such vehicle.

          ‘(iii) OPTION TO USE LIKE VEHICLE- For purposes of clause (i), at the option of the vehicle manufacturer, the increase for fuel efficiency may be calculated by comparing the new qualified hybrid motor vehicle to a ‘like vehicle’.

        ‘(C) INCREASE FOR ACCELERATED EMISSIONS PERFORMANCE- The amount determined under subparagraph (A)(ii) with respect to an applicable heavy duty hybrid motor vehicle shall be increased by the increase credit amount determined in accordance with the following tables:

          ‘(i) In the case of a vehicle which has a gross vehicle weight rating of not more than 14,000 pounds:

‘If the model year is:

The increase credit amount is:

2004

$3,500

2005

$3,000

2006

$2,500

2007

$2,000

2008

$1,500.

          ‘(ii) In the case of a vehicle which has a gross vehicle weight rating of more than 14,000 pounds but not more than 26,000 pounds:

‘If the model year is:

The increase credit amount is:

2004

$9,000

2005

$7,750

2006

$6,500

2007

$5,250

2008

$4,000.

          ‘(iii) In the case of a vehicle which has a gross vehicle weight rating of more than 26,000 pounds:

‘If the model year is:

The increase credit amount is:

2004

$14,000

2005

$12,000

2006

$10,000

2007

$8,000

2008

$6,000.

        ‘(D) CONSERVATION CREDIT-

          ‘(i) AMOUNT- The amount determined under subparagraph (A)(i) with respect to a passenger automobile or light truck shall be increased by--

            ‘(I) $250, if such vehicle achieves a lifetime fuel savings of at least 1,500 gallons of gasoline, and

            ‘(II) $500, if such vehicle achieves a lifetime fuel savings of at least 2,500 gallons of gasoline.

          ‘(ii) LIFETIME FUEL SAVINGS FOR LIKE VEHICLE- For purposes of clause (i), at the option of the vehicle manufacturer, the lifetime fuel savings fuel may be calculated by comparing the new qualified hybrid motor vehicle to a ‘like vehicle’.

        ‘(E) DEFINITIONS-

          ‘(i) APPLICABLE HEAVY DUTY HYBRID MOTOR VEHICLE- For purposes of subparagraph (C), the term ‘applicable heavy duty hybrid motor vehicle’ means a heavy duty hybrid motor vehicle which is powered by an internal combustion or heat engine which is certified as meeting the emission standards set in the regulations prescribed by the Administrator of the Environmental Protection Agency for 2009 and later model year diesel heavy duty engines or 2010 and later model year ottocycle heavy duty engines, as applicable.

          ‘(ii) HEAVY DUTY HYBRID MOTOR VEHICLE- For purposes of this paragraph, the term ‘heavy duty hybrid motor vehicle’ means a new qualified hybrid motor vehicle which has a gross vehicle weight rating of more than 10,000 pounds and draws propulsion energy from both of the following onboard sources of stored energy:

            ‘(I) An internal combustion or heat engine using consumable fuel which, for 2004 and later model vehicles, has received a certificate of conformity under the Clean Air Act and meets or exceeds a level of not greater than 3.0 grams per brake horsepower-hour of oxides of nitrogen and 0.01 per brake horsepower-hour of particulate matter.

            ‘(II) A rechargeable energy storage system.

          ‘(iii) MAXIMUM AVAILABLE POWER-

            ‘(I) PASSENGER AUTOMOBILE OR LIGHT TRUCK- For purposes of subparagraph (A)(i), the term ‘maximum available power’ means the maximum power available from the battery or other electrical storage device, during a standard 10 second pulse power test, divided by the sum of the battery or other electrical storage device and the SAE net power of the heat engine.

            ‘(II) HEAVY DUTY HYBRID MOTOR VEHICLE- For purposes of subparagraph (A)(ii), the term ‘maximum available power’ means the maximum power available from the battery or other electrical storage device, during a standard 10 second pulse power test, divided by the vehicle’s total traction power. The term ‘total traction power’ means the sum of the electric motor peak power and the heat engine peak power of the vehicle, except that if the electric motor is the sole means by which the vehicle can be driven, the total traction power is the peak electric motor power.

          ‘(iv) LIKE VEHICLE- For purposes of subparagraph (B)(iii), the term ‘like vehicle’ for a new qualified hybrid motor vehicle derived from a conventional production vehicle produced in the same model year means a model that is equivalent in the following areas:

            ‘(I) Body style (2-door or 4-door).

            ‘(II) Transmission (automatic or manual).

            ‘(III) Acceleration performance ( 0.05 seconds).

            ‘(IV) Drivetrain (2-wheel drive or 4-wheel drive).

            ‘(V) Certification by the Administrator of the Environmental Protection Agency.

          ‘(v) LIFETIME FUEL SAVINGS- For purposes of subsection (c)(2)(D), the term ‘lifetime fuel savings’ shall be calculated by dividing 120,000 by the difference between the 2002 model year city fuel economy for the vehicle inertia weight class and the city fuel economy for the new qualified hybrid motor vehicle.

      ‘(3) NEW QUALIFIED HYBRID MOTOR VEHICLE- For purposes of this subsection, the term ‘new qualified hybrid motor vehicle’ means a motor vehicle--

        ‘(A) which draws propulsion energy from onboard sources of stored energy which are both--

          ‘(i) an internal combustion or heat engine using combustible fuel, and

          ‘(ii) a rechargeable energy storage system,

        ‘(B) which, in the case of a passenger automobile or light truck, for 2004 and later model vehicles, has received a certificate of conformity under the Clean Air Act and meets or exceeds the equivalent qualifying California low emission vehicle standard under section 243(e)(2) of the Clean Air Act for that make and model year,

        ‘(C) the original use of which commences with the taxpayer,

        ‘(D) which is acquired for use or lease by the taxpayer and not for resale, and

        ‘(E) which is made by a manufacturer.

    ‘(d) LIMITATION BASED ON AMOUNT OF TAX- The credit allowed under subsection (a) for the taxable year shall not exceed the excess of--

      ‘(1) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over

      ‘(2) the sum of the credits allowable under subpart A and sections 27, 29, and 30A for the taxable year.

    ‘(e) OTHER DEFINITIONS AND SPECIAL RULES- For purposes of this section--

      ‘(1) CONSUMABLE FUEL- The term ‘consumable fuel’ means any solid, liquid, or gaseous matter which releases energy when consumed by an auxiliary power unit.

      ‘(2) MOTOR VEHICLE- The term ‘motor vehicle’ has the meaning given such term by section 30(c)(2).

      ‘(3) 2002 MODEL YEAR CITY FUEL ECONOMY- The 2002 model year city fuel economy with respect to any vehicle shall be measured under rules similar to the rules under section 4064(c).

      ‘(4) OTHER TERMS- The terms ‘automobile’, ‘passenger automobile’, ‘light truck’, and ‘manufacturer’ have the meanings given such terms in regulations prescribed by the Administrator of the Environmental Protection Agency for purposes of the administration of title II of the Clean Air Act (42 U.S.C. 7521 et seq.).

      ‘(5) REDUCTION IN BASIS- For purposes of this subtitle, the basis of any property for which a credit is allowable under subsection (a) shall be reduced by the amount of such credit so allowed.

      ‘(6) NO DOUBLE BENEFIT- The amount of any deduction or credit allowable under this chapter (other than the credit allowable under this section) shall be reduced by the amount of credit allowed under subsection (a) for such vehicle for the taxable year.

      ‘(7) PROPERTY USED BY TAX-EXEMPT ENTITIES- In the case of a credit amount which is allowable with respect to a motor vehicle which is acquired by an entity exempt from tax under this chapter, the person which sells or leases such vehicle to the entity shall be treated as the taxpayer with respect to the vehicle for purposes of this section and the credit shall be allowed to such person, but only if the person clearly discloses to the entity in any sale or lease document the specific amount of any credit otherwise allowable to the entity under this section and reduces the sale or lease price of such vehicle by an equivalent amount of such credit.

      ‘(8) RECAPTURE- The Secretary shall, by regulations, provide for recapturing the benefit of any credit allowable under subsection (a) with respect to any property which ceases to be property eligible for such credit (including recapture in the case of a lease period of less than the economic life of a vehicle).

      ‘(9) PROPERTY USED OUTSIDE UNITED STATES, ETC., NOT QUALIFIED- No credit shall be allowed under subsection (a) with respect to any property referred to in section 50(b) or with respect to the portion of the cost of any property taken into account under section 179.

      ‘(10) ELECTION TO NOT TAKE CREDIT- No credit shall be allowed under subsection (a) for any vehicle if the taxpayer elects to not have this section apply to such vehicle.

      ‘(11) CARRYFORWARD ALLOWED-

        ‘(A) IN GENERAL- If the credit amount allowable under subsection (a) for a taxable year exceeds the amount of the limitation under subsection (c) for such taxable year (referred to as the ‘unused credit year’ in this paragraph), such excess shall be allowed as a credit carryforward for each of the 20 taxable years following the unused credit year.

        ‘(B) RULES- Rules similar to the rules of section 39 shall apply with respect to the credit carryforward under subparagraph (A).

      ‘(12) INTERACTION WITH AIR QUALITY AND MOTOR VEHICLE SAFETY STANDARDS- Unless otherwise provided in this section, a motor vehicle shall not be considered eligible for a credit under this section unless such vehicle is in compliance with--

        ‘(A) the applicable provisions of the Clean Air Act for the applicable make and model year of the vehicle (or applicable air quality provisions of State law in the case of a State which has adopted such provision under a waiver under section 209(b) of the Clean Air Act), and

        ‘(B) the motor vehicle safety provisions of sections 30101 through 30169 of title 49, United States Code.

    ‘(f) REGULATIONS-

      ‘(1) IN GENERAL- The Secretary shall promulgate such regulations as necessary to carry out the provisions of this section.

      ‘(2) ADMINISTRATOR OF ENVIRONMENTAL PROTECTION AGENCY- The Administrator of the

Environmental Protection Agency, in coordination with the Secretary of Transportation and the Secretary of the Treasury, shall prescribe such regulations as necessary to determine whether a motor vehicle meets the requirements to be eligible for a credit under this section.

    ‘(g) TERMINATION- This section shall not apply to any property placed in service after--

      ‘(1) in the case of a new qualified fuel cell motor vehicle (as described in subsection (b)), December 31, 2013, and

      ‘(2) in the case of any other property, December 31, 2009.’.

    (b) CONFORMING AMENDMENTS-

      (1) Section 1016(a) is amended by striking ‘and’ at the end of paragraph (29), by striking the period at the end of paragraph (30) and inserting ‘, and’, and by adding at the end the following:

      ‘(31) to the extent provided in section 30B(e)(5).’.

      (2) Section 6501(m) is amended by inserting ‘30B(e)(10),’ after ‘30(d)(4),’.

      (3) The table of sections for subpart B of part IV of subchapter A of chapter 1 is amended by inserting after the item relating to section 30A the following:

‘Sec. 30B. Alternative motor vehicle credit.’.

    (c) EFFECTIVE DATE- The amendments made by this section shall apply to property placed in service after December 31, 2003, in taxable years ending after such date.

SEC. 5. EXTENSION AND EXPANSION OF CREDIT FOR ELECTRICITY PRODUCED FROM RENEWABLE RESOURCES.

    (a) EXTENSION OF CREDIT FOR WIND AND CLOSED-LOOP BIOMASS FACILITIES- Subparagraphs (A) and (B) of section 45(c)(3) are each amended by striking ‘2004’ and inserting ‘2009’.

    (b) EXPANSION OF CREDIT FOR OPEN-LOOP BIOMASS AND LANDFILL GAS FACILITIES- Paragraph (3) of section 45(c) is amended by adding at the end the following new subparagraphs:

        ‘(D) OPEN-LOOP BIOMASS FACILITIES- In the case of a facility using open-loop biomass to produce electricity, the term ‘qualified facility’ means any facility owned by the taxpayer which is originally placed in service before January 1, 2009.

        ‘(E) LANDFILL GAS FACILITIES- In the case of a facility producing electricity from gas derived from the biodegradation of municipal solid waste, the term ‘qualified facility’ means any facility owned by the taxpayer which is originally placed in service before January 1, 2009.’.

    (c) DEFINITION AND SPECIAL RULES- Subsection (c) of section 45 is amended by adding at the end the following new paragraphs:

      ‘(5) OPEN-LOOP BIOMASS- The term ‘open-loop biomass’ means any solid, nonhazardous, cellulosic waste material which is segregated from other waste materials and which is derived from--

        ‘(A) any of the following forest-related resources: mill residues, precommercial thinnings, slash, and brush, but not including old-growth timber,

        ‘(B) solid wood waste materials, including waste pallets, crates, dunnage, manufacturing and construction wood wastes (other than pressure-treated, chemically-treated, or painted wood wastes), and landscape or right-of-way tree trimmings, but not including municipal solid waste (garbage), gas derived from the biodegradation of solid waste, or paper that is commonly recycled, or

        ‘(C) agriculture sources, including orchard tree crops, vineyard, grain, legumes, sugar, and other crop by-products or residues.

      Such term shall not include closed-loop biomass.

      ‘(6) REDUCED CREDIT FOR CERTAIN PREEFFECTIVE DATE FACILITIES- In the case of any facility described in subparagraph (D) or (E) of paragraph (3) which is placed in service before the date of the enactment of this subparagraph--

        ‘(A) subsection (a)(1) shall be applied by substituting ‘1.0 cents’ for ‘1.5 cents’, and

        ‘(B) the 5-year period beginning on the date of the enactment of this paragraph shall be substituted in lieu of the 10-year period in subsection (a)(2)(A)(ii).

      ‘(7) LIMIT ON REDUCTIONS FOR GRANTS, ETC., FOR OPEN-LOOP BIOMASS FACILITIES- If the amount of the credit determined under subsection (a) with respect to any open-loop biomass facility is required to be reduced under paragraph (3) of subsection (b), the fraction under such paragraph shall in no event be greater than 4/5 .

      ‘(8) COORDINATION WITH SECTION 29- The term ‘qualified facility’ shall not include any facility the production from which is allowed as a credit

under section 29 for the taxable year or any prior taxable year.’.

    (d) EFFECTIVE DATE- The amendments made by this section shall apply to electricity sold after the date of the enactment of this Act.

SEC. 6. CREDIT FOR PRODUCTION FROM QUALIFYING ADVANCED CLEAN COAL TECHNOLOGY.

    (a) CREDIT FOR PRODUCTION FROM QUALIFYING ADVANCED CLEAN COAL TECHNOLOGY- Subpart D of part IV of subchapter A of chapter 1 (relating to business related credits) is amended by adding after section 45F the following:

‘SEC. 45G. CREDIT FOR PRODUCTION FROM QUALIFYING ADVANCED CLEAN COAL TECHNOLOGY.

    ‘(a) GENERAL RULE- For purposes of section 38, the qualifying advanced clean coal technology production credit of any taxpayer for any taxable year is equal to--

      ‘(1) the applicable amount of advanced clean coal technology production credit, multiplied by

      ‘(2) the sum of--

        ‘(A) the kilowatt hours of electricity, plus

        ‘(B) each 3,413 Btu of fuels or chemicals,

      produced by the taxpayer during such taxable year at a qualifying advanced clean coal technology facility during the 10-year period beginning on the date the facility was originally placed in service.

    ‘(b) APPLICABLE AMOUNT- For purposes of this section, the applicable amount of advanced clean coal technology production credit with respect to production from a qualifying advanced clean coal technology facility shall be determined as follows:

      ‘(1) Where the design coal has a heat content of more than 9,000 Btu per pound:

        ‘(A) In the case of a facility originally placed in service before 2009, if--

------------------------------------------------------------------------------------------------------------------------------
‘The facility design net heat rate, Btu/kWh (HHV) is equal to: The applicable amount is:                                      
                                                               For 1st 5 years of such service For 2d 5 years of such service 
------------------------------------------------------------------------------------------------------------------------------
Not more than 8,400                                            $.0060                          $.0038                         
More than 8,400 but not more than 8,550                        $.0025                          $.0010                         
More than 8,550 but not more than 8,750                        $.0010                          $.0010.                        
------------------------------------------------------------------------------------------------------------------------------

        ‘(B) In the case of a facility originally placed in service after 2008 and before 2013, if--

------------------------------------------------------------------------------------------------------------------------------
‘The facility design net heat rate, Btu/kWh (HHV) is equal to: The applicable amount is:                                      
                                                               For 1st 5 years of such service For 2d 5 years of such service 
------------------------------------------------------------------------------------------------------------------------------
Not more than 7,770                                            $.0105                          $.0090                         
More than 7,770 but not more than 8,125                        $.0085                          $.0068                         
More than 8,125 but not more than 8,350                        $.0075                          $.0055.                        
------------------------------------------------------------------------------------------------------------------------------

        ‘(C) In the case of a facility originally placed in service after 2012 and before 2017, if--

------------------------------------------------------------------------------------------------------------------------------
‘The facility design net heat rate, Btu/kWh (HHV) is equal to: The applicable amount is:                                      
                                                               For 1st 5 years of such service For 2d 5 years of such service 
------------------------------------------------------------------------------------------------------------------------------
Not more than 7,380                                            $.0140                          $.01                           
More than 7,380 but not more than 7,720                        $.0120                          $.0090.                        
------------------------------------------------------------------------------------------------------------------------------

      ‘(2) Where the design coal has a heat content of not more than 9,000 Btu per pound:

        ‘(A) In the case of a facility originally placed in service before 2009, if--

------------------------------------------------------------------------------------------------------------------------------
‘The facility design net heat rate, Btu/kWh (HHV) is equal to: The applicable amount is:                                      
                                                               For 1st 5 years of such service For 2d 5 years of such service 
------------------------------------------------------------------------------------------------------------------------------
Not more than 8,500                                            $.0060                          $.0038                         
More than 8,500 but not more than 8,650                        $.0025                          $.0010                         
More than 8,650 but not more than 8,750                        $.0010                          $.0010.                        
------------------------------------------------------------------------------------------------------------------------------

        ‘(B) In the case of a facility originally placed in service after 2008 and before 2013, if--

------------------------------------------------------------------------------------------------------------------------------
‘The facility design net heat rate, Btu/kWh (HHV) is equal to: The applicable amount is:                                      
                                                               For 1st 5 years of such service For 2d 5 years of such service 
------------------------------------------------------------------------------------------------------------------------------
Not more than 8,000                                            $.0105                          $.009                          
More than 8,000 but not more than 8,250                        $.0085                          $.0068                         
More than 8,250 but not more than 8,400                        $.0075                          $.0055.                        
------------------------------------------------------------------------------------------------------------------------------

        ‘(C) In the case of a facility originally placed in service after 2012 and before 2017, if--

------------------------------------------------------------------------------------------------------------------------------
‘The facility design net heat rate, Btu/kWh (HHV) is equal to: The applicable amount is:                                      
                                                               For 1st 5 years of such service For 2d 5 years of such service 
------------------------------------------------------------------------------------------------------------------------------
Not more than 7,800                                            $.0140                          $.0115                         
More than 7,800 but not more than 7,950                        $.0120                          $.0090.                        
------------------------------------------------------------------------------------------------------------------------------

      ‘(3) Where the clean coal technology facility is producing fuel or chemicals:

        ‘(A) In the case of a facility originally placed in service before 2009, if--

------------------------------------------------------------------------------------------------------------------------------
‘The facility design net thermal efficiency (HHV) is equal to: The applicable amount is:                                      
                                                               For 1st 5 years of such service For 2d 5 years of such service 
------------------------------------------------------------------------------------------------------------------------------
Not less than 40.6 percent                                     $.0060                          $.0038                         
Less than 40.6 but not less than 40 percent                    $.0025                          $.0010                         
Less than 40 but not less than 39 percent                      $.0010                          $.0010.                        
------------------------------------------------------------------------------------------------------------------------------

        ‘(B) In the case of a facility originally placed in service after 2008 and before 2013, if--

------------------------------------------------------------------------------------------------------------------------------
‘The facility design net thermal efficiency (HHV) is equal to: The applicable amount is:                                      
                                                               For 1st 5 years of such service For 2d 5 years of such service 
------------------------------------------------------------------------------------------------------------------------------
Not less than 43.9 percent                                     $.0105                          $.009                          
Less than 43.9 but not less than 42 percent                    $.0085                          $.0068                         
Less than 42 but not less than 40.9 percent                    $.0075                          $.0055.                        
------------------------------------------------------------------------------------------------------------------------------

        ‘(C) In the case of a facility originally placed in service after 2012 and before 2017, if--

------------------------------------------------------------------------------------------------------------------------------
‘The facility design net thermal efficiency (HHV) is equal to: The applicable amount is:                                      
                                                               For 1st 5 years of such service For 2d 5 years of such service 
------------------------------------------------------------------------------------------------------------------------------
Not less than 44.2 percent                                     $.0140                          $.0115                         
Less than 44.2 but not less than 43.6 percent                  $.0120                          $.0090.                        
------------------------------------------------------------------------------------------------------------------------------

    ‘(c) INFLATION ADJUSTMENT FACTOR- For calendar years after 2003, each amount in paragraphs (1), (2), and (3) of subsection (b) shall be adjusted by multiplying such amount by the inflation adjustment factor for the calendar year in which the amount is applied. If any amount as increased under the preceding sentence is not

a multiple of 0.01 cent, such amount shall be rounded to the nearest multiple of 0.01 cent.

    ‘(d) DEFINITIONS AND SPECIAL RULES- For purposes of this section--

      ‘(1) IN GENERAL- Any term used in this section which is also used in section 48A shall have the meaning given such term in section 48A.

      ‘(2) APPLICABLE RULES- The rules of paragraphs (3), (4), and (5) of section 45 shall apply.

      ‘(3) INFLATION ADJUSTMENT FACTOR- The term ‘inflation adjustment factor’ means, with respect to a calendar year, a fraction the numerator of which is the GDP implicit price deflator for the preceding calendar year and the denominator of which is the GDP implicit price deflator for the calendar year 2003.

      ‘(4) GDP IMPLICIT PRICE DEFLATOR- The term ‘GDP implicit price deflator’ means the most recent revision of the implicit price deflator for the gross domestic product as computed by the Department of Commerce before March 15 of the calendar year.’.

    (b) CREDIT TREATED AS BUSINESS CREDIT- Section 38(b) is amended by striking ‘plus’ at the end of paragraph (14), by striking the period at the end of paragraph (15) and inserting ‘, plus’, and by adding at the end the following:

      ‘(16) the qualifying advanced clean coal technology production credit determined under section 45G(a).’.

    (c) TRANSITIONAL RULE- Section 39(d) (relating to transitional rules) is amended by adding after paragraph (10) the following:

      ‘(11) NO CARRYBACK OF SECTION 45G CREDIT BEFORE EFFECTIVE DATE- No portion of the unused business credit for any taxable year which is attributable to the qualifying advanced clean coal technology production credit determined under section 45G may be carried back to a taxable year ending before the date of the enactment of section 45G.’.

    (d) CLERICAL AMENDMENT- The table of sections for subpart D of part IV of subchapter A of chapter 1 is amended by adding at the end the following:

‘Sec. 45G. Credit for production from qualifying advanced clean coal technology.’.

    (e) EFFECTIVE DATE- The amendments made by this section shall apply to production after the date of the enactment of this Act.

SEC. 7. OIL AND GAS FROM MARGINAL WELLS.

    (a) IN GENERAL- Subpart D of part IV of subchapter A of chapter 1 (relating to business credits) is amended by adding at the end the following:

‘SEC. 45H. CREDIT FOR PRODUCING OIL AND GAS FROM MARGINAL WELLS.

    ‘(a) GENERAL RULE- For purposes of section 38, the marginal well production credit for any taxable year is an amount equal to the product of--

      ‘(1) the credit amount, and

      ‘(2) the qualified credit oil production and the qualified natural gas production which is attributable to the taxpayer.

    ‘(b) CREDIT AMOUNT- For purposes of this section--

      ‘(1) IN GENERAL- The credit amount is--

        ‘(A) $3 per barrel of qualified crude oil production, and

        ‘(B) 50 cents per 1,000 cubic feet of qualified natural gas production.

      ‘(2) REDUCTION AS OIL AND GAS PRICES INCREASE-

        ‘(A) IN GENERAL- The $3 and 50 cents amounts under paragraph (1) shall each be reduced (but not below zero) by an amount which bears the same ratio to such amount (determined without regard to this paragraph) as--

          ‘(i) the excess (if any) of the applicable reference price over $15 ($1.67 for qualified natural gas production), bears to

          ‘(ii) $3 ($0.33 for qualified natural gas production).

        The applicable reference price for a taxable year is the reference price of the calendar year preceding the calendar year in which the taxable year begins.

        ‘(B) INFLATION ADJUSTMENT- In the case of any taxable year beginning in a calendar year after 2003, each of the dollar amounts contained in subparagraph (A) shall be increased to an amount equal to such dollar amount multiplied by the inflation adjustment factor for such calendar year (determined under section 43(b)(3)(B) by substituting ‘2002’ for ‘1990’).

        ‘(C) REFERENCE PRICE- For purposes of this paragraph, the term ‘reference price’ means, with respect to any calendar year--

          ‘(i) in the case of qualified crude oil production, the reference price determined under section 29(d)(2)(C), and

          ‘(ii) in the case of qualified natural gas production, the Secretary’s estimate of the annual average wellhead price per 1,000 cubic feet for all domestic natural gas.

    ‘(c) QUALIFIED CRUDE OIL AND NATURAL GAS PRODUCTION- For purposes of this section--

      ‘(1) IN GENERAL- The terms ‘qualified crude oil production’ and ‘qualified natural gas production’ mean domestic crude oil or natural gas which is produced from a qualified marginal well.

      ‘(2) Limitation on amount of production which may qualify-

        ‘(A) IN GENERAL- Crude oil or natural gas produced during any taxable year from any well shall not be treated or qualified crude oil production or qualified natural gas production to the extent production from the well during the taxable year exceeds 1,095 barrels or barrel equivalents.

        ‘(B) Proportionate reductions-

          ‘(i) SHORT TAXABLE YEARS- In the case of a short taxable year, the limitations under this paragraph shall be proportionately reduced to reflect the ratio which the number of days in such taxable year bears to 365.

          ‘(ii) WELLS NOT IN PRODUCTION ENTIRE YEAR- In the case of a well which is not capable of production during each day of a taxable year, the limitations under this paragraph applicable to the well shall be proportionately reduced to reflect the ratio which the number of days of production bears to the total number of days in the taxable year.

      ‘(3) Definitions-

        ‘(A) QUALIFIED MARGINAL WELL- The term ‘qualified marginal well’ means a domestic well--

          ‘(i) the production from which during the taxable year is treated as marginal production under section 613A(c)(6), or

          ‘(ii) which, during the taxable year--

            ‘(I) has average daily production of not more than 25 barrel equivalents, and

            ‘(II) produces water at a rate not less than 95 percent of total well effluent.

        ‘(B) CRUDE OIL, ETC- The terms ‘crude oil’, ‘natural gas’, ‘domestic’, and ‘barrel’ have the meanings given such terms by section 613A(e).

        ‘(C) BARREL EQUIVALENT- The term ‘barrel equivalent’ means, with respect to natural gas, a conversation ratio of 6,000 cubic feet of natural gas to 1 barrel of crude oil.

    ‘(d) Other Rules-

      ‘(1) PRODUCTION ATTRIBUTABLE TO THE TAXPAYER- In the case of a qualified marginal well in which there is more than one owner of operating interests in the well and the crude oil or natural gas production exceeds the limitation under subsection (c)(2), qualifying crude oil production or qualifying natural gas production attributable to the taxpayer shall be determined on the basis of the ratio which taxpayer’s revenue interest in the production bears to the aggregate of the revenue interests of all operating interest owners in the production.

      ‘(2) OPERATING INTEREST REQUIRED- Any credit under this section may be claimed only on production which is attributable to the holder of an operating interest.

      ‘(3) PRODUCTION FROM NONCONVENTIONAL SOURCES EXCLUDED- In the case of production from a qualified marginal well which is eligible for the credit allowed under section 29 for the taxable year, no credit shall be allowable under this section unless the taxpayer elects not to claim the credit under section 29 with respect to the well.

      ‘(4) NONCOMPLIANCE WITH POLLUTION LAWS- For purposes of subsection (c)(3)(A), a marginal well which is not in compliance with the applicable State and Federal pollution prevention, control, and permit requirements for any period of time shall not be considered to be a qualified marginal well during such period.’.

    (b) CREDIT TREATED AS BUSINESS CREDIT- Section 38(b) is amended by striking ‘plus’ at the end of paragraph (15), by striking the period at the end of paragraph (16) and inserting ‘, plus’, and by adding at the end the following:

      ‘(17) the marginal oil and gas well production credit determined under section 45H(a).’.

    (c) CARRYBACK- Subsection (a) of section 39 (relating to carryback and carryforward of unused credits generally) is amended by adding at the end the following:

      ‘(3) 10-YEAR CARRYBACK FOR MARGINAL OIL AND GAS WELL PRODUCTION CREDIT- In the case of the marginal oil and gas well production credit--

        ‘(A) this section shall be applied separately from the business credit (other than the marginal oil and gas well production credit),

        ‘(B) paragraph (1) shall be applied by substituting ‘10 taxable years’ for ‘1 taxable years’ in subparagraph (A) thereof, and

        ‘(C) paragraph (2) shall be applied--

          ‘(i) by substituting ‘31 taxable years’ for ‘21 taxable years’ in subparagraph (A) thereof, and

          ‘(ii) by substituting ‘30 taxable years’ for ‘20 taxable years’ in subparagraph (A) thereof.’.

    (d) COORDINATION WITH SECTION 29- Section 29(a) is amended by striking ‘There’ and inserting ‘At the election of the taxpayer, there’.

    (e) CLERICAL AMENDMENT- The table of sections for subpart D of part IV of subchapter A of chapter I is amended by adding at the end the following:

‘Sec. 45H. Credit for producing oil and gas from marginal wells.’.

    (f) EFFECTIVE DATE- The amendments made by this section shall apply to production in taxable years beginning after December 31, 2003.

SEC. 8. NATURAL GAS GATHERING LINES TREATED AS 7-YEAR PROPERTY.

    (a) IN GENERAL- Subparagraph (C) of section 168(e)(3) (relating to classification of certain property) is amended by striking ‘and’ at the end of clause (i), by redesignating clause (ii) as clause (iii), and by inserting after clause (i) the following new clause:

          ‘(ii) any natural gas gathering line, and’.

    (b) NATURAL GAS GATHERING LINE- Subsection (i) of section 168 is amended by adding after paragraph (14) the following new paragraph:

      ‘(15) NATURAL GAS GATHERING LINE- The term ‘natural gas gathering line’ means--

        ‘(A) the pipe, equipment, and appurtenances determined to be a gathering line by the Federal Energy Regulatory Commission, or

        ‘(B) the pipe, equipment, and appurtenances used to deliver natural gas from the wellhead or a commonpoint to the point at which such gas first reaches--

          ‘(i) a gas processing plant,

          ‘(ii) an interconnection with a transmission pipeline certificated by the Federal Energy Regulatory Commission as an interstate transmission pipeline,

          ‘(iii) an interconnection with an intrastate transmission pipeline, or

          ‘(iv) a direct interconnection with a local distribution company, a gas storage facility, or an industrial consumer.’.

    (c) ALTERNATIVE SYSTEM- The table contained in section 168(g)(3)(B) is amended by inserting after the item relating to subparagraph (C)(i) the following:

‘(C)(ii)

--10’.

    (d) ALTERNATIVE MINIMUM TAX EXCEPTION- Subparagraph (B) of section 56(a)(1) is amended by inserting before the period the following: ‘or in clause (ii) of section 168(e)(3)(C)’.

    (e) EFFECTIVE DATE- The amendments made by this section shall apply to property placed in service after the date of the enactment of this Act.

SEC. 9. TEMPORARY SUSPENSION OF LIMITATION BASED ON 65 PERCENT OF TAXABLE INCOME AND EXTENSION OF SUSPENSION OF TAXABLE INCOME LIMIT WITH RESPECT TO MARGINAL PRODUCTION.

    (a) LIMITATION BASED ON 65 PERCENT OF TAXABLE INCOME- Subsection (d) of section 613A (relating to limitation on percentage depletion in case of oil and gas wells) is amended by adding at the end the following new paragraph:

      ‘(6) TEMPORARY SUSPENSION OF TAXABLE INCOME LIMIT- Paragraph (1) shall not apply to taxable years beginning after December 31, 2003, and before January 1, 2009, including with respect to amounts carried under the second sentence of paragraph (1) to such taxable years.’.

    (b) EXTENSION OF SUSPENSION OF TAXABLE INCOME LIMIT WITH RESPECT TO MARGINAL PRODUCTION- Subparagraph (H) of section 613A(c)(6) (relating to temporary suspension of taxable income limit with respect to marginal production) is amended by striking ‘2004’ and inserting ‘2009’.

    (c) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to taxable years beginning after December 31, 2003.

SEC. 10. ELECTION TO EXPENSE GEOLOGICAL AND GEOPHYSICAL EXPENDITURES.

    (a) IN GENERAL- Section 263 (relating to capital expenditures) is amended by adding after subsection (i) the following:

    ‘(j) GEOLOGICAL AND GEOPHYSICAL EXPENDITURES FOR DOMESTIC OIL AND GAS WELLS- Notwithstanding subsection (a), a taxpayer may elect to treat geological and geophysical expenses incurred in connection with the exploration for, or development of, oil or gas within the United States (as defined in section 638) as expenses which are not chargeable to capital account. Any expenses so treated shall be allowed as a deduction in the taxable year in which paid or incurred.’.

    (b) CONFORMING AMENDMENT- Section 263A(c)(3) is amended by inserting ‘263(j),’ after ‘263(i),’.

    (c) EFFECTIVE DATE- The amendments made by this section shall apply to costs paid or incurred in taxable years beginning after December 31, 2003.

SEC. 11. FIVE-YEAR NET OPERATING LOSS CARRYBACK FOR LOSSES ATTRIBUTABLE TO OPERATING MINERAL INTERESTS OF OIL AND GAS PRODUCERS.

    (a) IN GENERAL- Paragraph (1) of section 172(b) (relating to years to which loss may be carried) is amended by adding at the end the following new subparagraph:

        ‘(I) LOSSES ON OPERATING MINERAL INTERESTS OF OIL AND GAS PRODUCERS- In the case of a taxpayer which has an eligible oil and gas loss (as defined in subsection (k)) for a taxable year, such eligible oil and gas loss shall be a net operating loss carryback to each of the 5 taxable years preceding the taxable year of such loss.’.

    (b) ELIGIBLE OIL AND GAS LOSS- Section 172 is amended by redesignating subsection (k) as subsection (l) and by inserting after subsection (j) the following new subsection:

    ‘(k) ELIGIBLE OIL AND GAS LOSS- For purposes of this section--

      ‘(1) IN GENERAL- The term ‘eligible oil and gas loss’ means the lesser of--

        ‘(A) the amount which would be the net operating loss for the taxable year if only income and deductions attributable to operating mineral interests (as defined in section 614(d)) in oil and gas wells are taken into account, or

        ‘(B) the amount of the net operating loss for such taxable year.

      ‘(2) COORDINATION WITH SUBSECTION (b)(2)- For purposes of applying subsection (b)(2), an eligible oil and gas loss for any taxable year shall be treated in a manner similar to the manner in which a specified liability loss is treated.

      ‘(3) ELECTION- Any taxpayer entitled to a 5-year carryback under subsection (b)(1)(H) from any loss year may elect to have the carryback period with respect to such loss year determined without regard to subsection (b)(1)(H).’.

    (c) EFFECTIVE DATE- The amendments made by this section shall apply to net operating losses for taxable years beginning after December 31, 2003.

SEC. 12. EXTENSION AND MODIFICATION OF CREDIT FOR PRODUCING FUEL FROM A NONCONVENTIONAL SOURCE.

    (a) IN GENERAL- Section 29 is amended by adding at the end the following new subsection:

    ‘(h) EXTENSION FOR OTHER FACILITIES-

      ‘(1) EXTENSION FOR OIL AND CERTAIN GAS- In the case of a well for producing qualified fuels described in subparagraph (A) or (B)(i) of subsection (c)(1)--

        ‘(A) APPLICATION OF CREDIT FOR NEW WELLS- Notwithstanding subsection (f), this section shall apply with respect to such fuels--

          ‘(i) which are produced from a well drilled after the date of the enactment of this subsection and before January 1, 2014, and

          ‘(ii) which are sold not later than the close of the 4-year period beginning on the date that such well is drilled.

        ‘(B) EXTENSION OF CREDIT FOR OLD WELLS- Subsection (f)(2) shall be applied by substituting ‘2009’ for ‘2003’ with respect to wells described in subsection (f)(1)(A) with respect to such fuels.

      ‘(2) EXTENSION FOR FACILITIES PRODUCING QUALIFIED FUEL FROM LANDFILL GAS-

        ‘(A) IN GENERAL- In the case of a facility for producing qualified fuel from landfill gas which was placed in service after June 30, 1998, and before January 1, 2009, this section shall apply to fuel produced at such facility during the 5-year period beginning on the later of--

          ‘(i) the date such facility was placed in service, or

          ‘(ii) the date of the enactment of this subsection.

        ‘(B) REDUCTION OF CREDIT FOR CERTAIN LANDFILL FACILITIES- In the case of a facility to which paragraph (1) applies and which is subject to the 1996 New Source Performance Standards/Emissions Guidelines of the Environmental Protection Agency, subsection (a)(1) shall be applied by substituting ‘$2’ for ‘$3’.

      ‘(3) SPECIAL RULES- In determining the amount of credit allowable under this section solely by reason of this subsection--

        ‘(A) DAILY LIMIT- The amount of qualified fuels sold during any taxable year which may be taken into account by reason of this subsection with respect to any project shall not exceed an average barrel-of-oil equivalent of 200,000 cubic feet of natural gas per day. Days before the date the project is placed in service shall not be taken into account in determining such average.

        ‘(B) EXTENSION PERIOD TO COMMENCE WITH UNADJUSTED CREDIT AMOUNT- In the case of fuels sold during 2003 and 2004, the dollar amount applicable under subsection (a)(1) shall be $3 (without regard to subsection (b)(2)). In the case of fuels sold after 2004, subparagraph (B) of subsection (d)(2) shall be applied by substituting ‘2004’ for ‘1979’.’.

    (b) EFFECTIVE DATE- The amendment made by this section shall apply to fuel sold after the date of the enactment of this Act.